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Asian Flu or Wall Street Virus? Price and Volatility Spillovers of the Tech and Non-Tech Sectors in the United States and Asia

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Author Info

  • Jorge A. Chan-Lau
  • Iryna V. Ivaschenko

Abstract

This paper, using T-GARCH models, finds that the United States has been the major source of price and volatility spillovers to stock markets in the Asian region during three different periods in the last decade: the pre-Long Term Capital Management crisis period, the "tech bubble" period, and the "stock market correction" period. Hong Kong SAR , Japan, and Singapore also were important spillover sources within the Asian region and affected United States to a lesser degree during the "stock market correction" period. There is also evidence of structural breaks in the stock price and volatility dynamics induced during the "tech bubble" period.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/154.

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Length: 30
Date of creation: 01 Sep 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/154

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Related research

Keywords: Stock markets; Asia; spillovers; stock market; stock returns; stock price; stock prices; foreign stock; financial economics; lead; stock market prices; stock price volatility; equity markets; financial contagion; financial markets; flood; stock market crash; international financial markets; financial fragility; financial market; stock price index; international capital; stock market price; equity market; stock index; global stock markets; stock market movements; bond; international finance; international capital markets; financial system; interest rates;

References

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  1. Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussão, Department of Economics PUC-Rio (Brazil) 400, Department of Economics PUC-Rio (Brazil).
  2. Booth, G. Geoffrey & Martikainen, Teppo & Tse, Yiuman, 1997. "Price and volatility spillovers in Scandinavian stock markets," Journal of Banking & Finance, Elsevier, Elsevier, vol. 21(6), pages 811-823, June.
  3. Hilliard, Jimmy E, 1979. "The Relationship between Equity Indices on World Exchanges," Journal of Finance, American Finance Association, American Finance Association, vol. 34(1), pages 103-14, March.
  4. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
  5. Roberto Rigobon, 2002. "Contagion: How to Measure It?," NBER Chapters, National Bureau of Economic Research, Inc, in: Preventing Currency Crises in Emerging Markets, pages 269-334 National Bureau of Economic Research, Inc.
  6. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-47, August.
  7. Roger Lagunoff & Stacey L. Schreft, 1999. "Financial fragility with rational and irrational exuberance," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 531-567.
  8. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(1), pages 3-29, September.
  9. Lin, Wen-Ling & Engle, Robert F & Ito, Takatoshi, 1994. "Do Bulls and Bears Move across Borders? International Transmission of Stock Returns and Volatility," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 7(3), pages 507-38.
  10. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series, European Central Bank 0035, European Central Bank.
  11. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(5), pages 931-955, September.
  12. T. Todd Smith & Garry J. Schinasi, 1999. "Portfolio Diversification, Leverage, and Financial Contagion," IMF Working Papers, International Monetary Fund 99/136, International Monetary Fund.
  13. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(3), pages 309-327, December.
  14. Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
  15. Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 24(02), pages 241-256, June.
  16. Brian H. Boyer & Michael S. Gibson & Mico Loretan, 1997. "Pitfalls in tests for changes in correlations," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 597, Board of Governors of the Federal Reserve System (U.S.).
  17. Luis Catão & Robin Brooks, 2000. "The New Economy and Global Stock Return," IMF Working Papers, International Monetary Fund 00/216, International Monetary Fund.
  18. Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, American Finance Association, vol. 56(4), pages 1401-1440, 08.
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Citations

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Cited by:
  1. Jorge A. Chan-Lau & Donald J. Mathieson & James Y. Yao, 2004. "Extreme Contagion in Equity Markets," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 8.
  2. Chan-Lau, Jorge A. & Ivaschenko, Iryna, 2003. "Asian Flu or Wall Street virus? Tech and non-tech spillovers in the United States and Asia," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 13(4-5), pages 303-322, December.
  3. Li, Huimin & Jeon, Bang Nam & Cho, Seong-Yeon & Chiang, Thomas C., 2008. "The impact of sovereign rating changes and financial contagion on stock market returns: Evidence from five Asian countries," Global Finance Journal, Elsevier, vol. 19(1), pages 46-55.
  4. repec:ebl:ecbull:v:6:y:2007:i:27:p:1-7 is not listed on IDEAS

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